Killing a profitable product

By Jason Fried | Yahoo Small Business

In 2009, 37signals launched Sortfolio. Co-founder Jason Fried says it earns the company $200,000 a year. Now, it plans to retire it. Is that nuts?

Lately, we've been taking inventory at 37 signals. Over the past eight years, we've built more than two dozen apps. Some are available to the public; others are for internal use. But all of them need to be online and available 24/7/365. This means we've got a lot of balls in the air.

The more balls in the air, the less time each one spends in your hands. And you can't make something better if you aren't constantly touching it. So I recently decided that if we can't dedicate the time to make a product better, it's time to shut it down. Coasting on—or worse, ignoring—a product isn't something I ever want to do.

We created an "end of the road" list of products that we haven't worked on in a long time. Among them: Ta-da List, a free, Web-based listmaking app that we created in 2005; Writeboard, a free, online text-editing program; and a few others. We like all of them, but none are essential to our business today. So we decided to retire them. People with existing accounts can keep using Ta-da List, for example, but we're no longer offering new sign-ups. The same is true for Writeboard.

Another product on our list is Sortfolio—a visual directory of Web design firms that we created in 2009 to help small businesses find designers. Design firms can list their services for free or pay $99 a month to upgrade to a more prominent premium listing. Sortfolio is unique on our list, in that some users pay for it. In fact, it generates actual revenue and significant profits—some $17,000 a month, or more than $200,000 a year. Nonetheless, we decided it was time to let it go.

Say what? you're probably asking. What entrepreneur voluntarily parts with a profitable service? Isn't making money the whole point? Are we crazy?

Plenty of people think so. When we announced on our company blog that we'd either be selling or retiring Sortfolio, the Comments section went nuts. "Why not just hire someone to run it?" some folks asked. "Just keep running it and give the money away to charity if you don't want it," suggested others. Some commenters offered advice on how we might integrate Sortfolio into our business.

But here's the thing. Sortfolio may be profitable, but it's far less profitable than our other products. As a result, it gets far less of our attention. And given the way things are going, it'll get even less TLC in the future. Sortfolio is standing still. And anything that's standing still is atrophying. That's not good for us, and it's not good for users of Sortfolio, either. Sortfolio needs an entrepreneur who wants to invest time and energy into it—something we just cannot do. We're a small company with a small team, and we have to use our resources wisely.

So we put it up for sale. We posted the revenue and profit numbers on our blog and offered to provide any information requested by qualified buyers. We priced it at $480,000. For a service that generates $200,000 a year in profit with virtually no work, we think that's very reasonable. If it doesn't sell by July, we'll be taking it offline.

Sure, there were other options. Like some of the commenters on our blog said, we could have hired someone to work only on Sortfolio. But the truth is that helping connect design firms and small companies just isn't part of our core focus anymore. Sortfolio will be a much better business in someone else's hands.

The bottom line: Profits aren't everything. Sometimes you have to prune your winners. That way, you can focus your attention on your bigger winners.